Aluminum climbed to the highest in more than a decade as political unrest in Guinea fueled concerns over supply of the raw material needed to make the metal.
A unit of the military seized power and suspended the constitution, with head of special forces, Guinean Colonel Mamady Doumbouya, urging the army to back him.
That rattled global aluminum markets yesterday — prices in London notched a fresh 10-year high and futures in China climbed to the highest since 2006 — as the political instability raises the possibility of disruptions to bauxite shipments from the key global supplier.
Photo: AFP
Aluminum has climbed about 40 percent this year in London, as massive global stimulus measures stoked demand just as smelters in China, the biggest producer, struggled to maintain output during a seasonal power crunch and Beijing sought to rein in the country’s carbon emissions.
Bauxite is the feedstock used to make alumina, which is further processed into aluminum, and Guinea accounts for more than half of all of Chinese imports.
The market “can be seriously shaken” by the situation, United Co Rusal founder Oleg Deripaska wrote in a Telegram post.
The company’s shares surged 14 percent in Hong Kong to the highest since 2012.
Prices on the London Metal Exchange rose as much as 1.8 percent to US$2,775.50 per tonne, the highest since May 2011, and traded at US$2,757. In China, futures jumped as much as 3.4 percent to the highest since 2006, before paring gains to 2.2 percent.
“Investors are quite concerned given China buys a big chunk of bauxite from Guinea,” although there have not been reports of disruptions yet and the extent of any impact would depend on how the situation evolves, said Xiong Hui (熊慧), chief aluminum analyst with Beijing Antaike Information Development Co (安泰科信息開發).
Aluminum Corp of China Ltd (中國鋁業), the biggest producer and which has a bauxite project in Guinea, said that all of its operations are normal and it has ample bauxite inventories at its plants in China. Shares in Hong Kong climbed as much as 10 percent.
Investors are also looking at ongoing production cuts in China’s Guangxi Province, which is further tightening the market, Xiong said.
The energy-intensive aluminum industry has come under increased scrutiny as part of Beijing’s pollution crackdown. China produces about 60 percent of the world’s total, with concerns around output prompting some of its largest smelters to pledge to ensure supply, and metal to be released from state reserves to ease tightness.
The country has become increasingly reliant on imports, a rare development that has drained global supplies of the usually abundant metal.
Aluminum, used in everything from car parts to drinks cans and home appliances, fared particularly badly at the onset of the COVID-19 pandemic, but is enjoying a strong resurgence as consumer demand and economic activity bounces back. Longer term, the metal is set to benefit from its use in electric vehicles and renewable energy.
The rally is creating a huge windfall for producers who have been plagued by weak prices for years, and have often been pumping out metal at a loss. The gains over the past year are adding further fuel to concerns over inflation as manufacturers increasingly look to pass on costs to consumers.
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